Origins of the Sicilian Mafia: The Market for Lemons

In this article, we study the emergence of an extractive institution that hampered economic development in Italy for more than a century: the Sicilian mafia. Since its first appearance in the late 1800s, the reasons behind the rise of the Sicilian mafia have remained a puzzle. In this article, we argue that the mafia arose as a response to an exogenous shock in the demand for oranges and lemons, following Lind's discovery in the late eighteenth century that citrus fruits cured scurvy. More specifically, we claim that mafia appeared in locations where producers made high profits from citrus production for overseas export. Operating in an environment with a weak rule of law, the mafia protected citrus production from predation and acted as intermediaries between producers and exporters. Using original data from a parliamentary inquiry in 1881–1886 on Sicilian towns, the Damiani Inquiry, we show that mafia presence is strongly related to the production of oranges and lemons. The results hold when different data sources and several controls are employed.